2016 (1) TMI 87 - HC - Companies Law

Claim for set-off or adjustment - adjudicating the winding up petition - Held that - Though the claim for set-off or adjustment is made by the respondent towards the alleged damages against the amount payable by it, for the limited purpose of adjudicating the winding up petition, this Court cannot treat such a claim for set-off or adjustment as lacking bona fides. Whether the respondent is really entitled to such setoff or adjustment needs to be adjudicated by the competent Court of law. For the present purpose, it will suffice, if this Court is satisfied that the set-off or adjustment claimed by the respondent is not an afterthought and that it has been consistent in its stand in this regard much before the filing of the winding up petition. On these facts of the case, this Court is of the opinion that as there is a serious dispute regarding the debt claimed by the petitioner, the remedy under Section- 433(e) read with Sections-434(1) (a) and 439 of the Act is not an appropriate one and no order for winding up of the respondent for non-payment of the admitted debt can be passed. The Company Petition is, accordingly, dismissed, however leaving the petitioner free to avail common law remedies for recovery of the amount claimed by it from the respondent.

Summary

Issues:
- Company petition for winding up due to non-payment of debt
- Dispute over failure to secure visa leading to business loss
- Claim of set-off by respondent based on alleged damages
- Examination of clauses in agreement for prima facie satisfaction
- Bona fide dispute raised by respondent before winding up petition
- Legal principles regarding set-off and adjustment in debt disputes
- Court's decision on appropriateness of winding up order

Analysis:
The Company Petition was filed seeking an order to wind up the respondent for non-payment of debt. The petitioner, a travel agent, had been entrusted with arranging a visa for the respondent's Managing Director for a business trip to France. The respondent claimed business losses amounting to Rs. 40 lakhs due to the alleged failure of the petitioner to secure the visa on time. The respondent relied on specific clauses in the agreement to support its claim for damages, while the petitioner denied any negligence and insisted on the amount due to them.

The respondent argued for a set-off against the payment due to the alleged loss suffered, citing judgments from Calcutta and Patna High Courts to support the legitimacy of their claim. The Court examined the clauses in the agreement to determine the basis of the set-off claim and the bona fides of the respondent's debt denial. It was established that the respondent had raised the visa issue well before the winding up petition, indicating a genuine dispute regarding the debt.

Referring to legal precedents, the Court acknowledged the concept of set-off and adjustment in debt disputes, emphasizing that the respondent's claim should not be dismissed outright as lacking bona fides. The Court highlighted the need for a competent court to adjudicate the validity of the set-off claim, while ensuring that the respondent had consistently maintained its position before the petition was filed.

Ultimately, the Court dismissed the Company Petition, noting the serious dispute over the debt claimed by the petitioner. It deemed the winding up remedy under the relevant sections of the Companies Act inappropriate in this case, allowing the petitioner to pursue common law remedies for recovering the claimed amount from the respondent. The judgment emphasized the importance of genuine disputes and the need for proper legal adjudication in debt-related matters.